Third Quarter Strong for Churchill Downs and Penn National

Churchill Downs reported a 64% increase in net revenue and a 513% increase in earnings for its third quarter after the stock market closed Wednesday.

The strong numbers were the result of a management agreement that gave Churchill Downs income from Arlington Park about three months before closing on its purchase of the Chicago-area track. Revenue also was boosted by having Hollywood Park a part of the company for the full quarter. Last year during the same period, Hollywood Park added to the bottom line for just a few weeks. Net revenue for the quarter was $103.5 million compared to $63.1 million during the same three-month period of 1999. Fully diluted earnings per share climbed to 68 cents on 10.7 million shares, up from 12 cents on 9.5 million shares for the same period last year.

Tom Meeker, Churchill Downs' chief executive officer, said the significant gain was expected, then warned that the added revenue may be offset in the fourth quarter. He said numbers should suffer during the fourth quarter because Churchill Downs' will have the operating expenses associated with Arlington Park without the income from live racing. Also, the number of outstanding shares will increase to over 13 million shares since Arlington was bought in a stock swap.

"Although we face a difficult comparison in earnings per share for the fourth quarter, we expect to meet the published consensus estimate for our final period," Meeker said. He expects Churchill Downs' earnings for the year will at least equal the $1.72 per diluted share reported in 1999.

Penn National Gaming also reported increases for its third quarter with a significant caveat.

Revenue for the quarter increased 91.5% to $91.1 million, up from $47.5 million during the same period of 1999. The increase came from the first revenue of two recently acquired Mississippi casinos and a boost in income from additional coin-out slot machines at Charles Town Races in West Virginia. Net income rose 111% to $6 million up from $2.8 million last year during the third quarter, and earnings per share increased from 19 cents per share for the quarter in 1999 to 39 cents per share.

The caveat is the effect of a one-time charge of $6.5 million that Penn National paid on the early retirement of debt. With the added cost considered, net income falls to a loss of $581,000 or 4 cents per diluted share.

Peter M. Carlino, Penn National's chief executive officer, said he felt the company exhibited solid improvements across the board for the quarter. He said the one-time expense is overshadowed by a 105% rise in earnings, excluding the debt retirement.

"Penn National's continued strong financial performance in 2000 reflects the successful execution of our long-term growth strategy, which is driving gains both internally and through acquisitions," he said. Penn National has a pending agreement to acquire and operate the Casino Rouge, a riverboat casino on the Mississippi River in Baton Rouge, La., and take over the management contract for Casino Rama, a large gaming business about 80 miles from Toronto.